Decay at Sears

by Editor
October 30, 2013 at 9:17 am

https://www.smartertimes.com/1043/decay-at-sears

Sears Holdings is a stock I own, and I know and like and have done business with some of the company's directors (though I haven't discussed either this post or the Times article it addresses with them), so I hesitate before plunging in on this one. But sometimes the Times comes along with a story that is such an egregious example of bad journalism that it deserves to be ripped apart.

The Times makes a front-of-the-business section news article out of a photograph some guy took of a shoe rack at a Sears or K-Mart store with some empty slots. This is supposed to be a sign of the "decay" of Sears. That fails basic logic. Suppose the rack is empty because people bought the merchandise? That's how stores sell stuff and make money. If the Times editors don't understand this, consider an analogy from the newspaper business. If you own the New York Times, what would you prefer to see when you stroll by Manhattan newsstands at 7 p.m.? Racks groaning full of stacked-high copies of the New York Times? No, you want the racks to be empty, because you sold all the newspapers earlier in the day.

The Times article quotes Gary Balter, an analyst with Credit Suisse. The Times doesn't mention that Mr. Balter has been predicting that Sears Holdings stock will plunge. Instead the stock is up 50 percent year to date. What credibility does Mr. Balter have on the matter? Is Credit Suisse or its clients short Sears Holdings? The Times doesn't say. The other people quoted in the story — Mary Ross Gilbert of Imperial Capital and Brian Sozzi of Belus Capital Advisors — are pretty small fish in a money management world in which some other, much larger fish, not mentioned in the article, like Bruce Berkowitz's Fairholme Fund, are reportedly betting on Sears Holdings. That doesn't necessarily mean the smaller fish are wrong — small fish sometimes get it right and become bigger fish — but the Times doesn't give readers much help in evaluating the credibility of these sources. Do they have financial bets for or against Sears Holdings? How large are the bets? How much money do they manage?

Then there's this, about Sears CEO Edward Lampert: "Mr. Lampert, a mercurial free market advocate and a professed Ayn Rand fan, declined requests for an interview." How are Mr. Lampert's tastes in politics or literature relevant here? An online dictionary defines mercurial as "characterized by rapid and unpredictable changeableness of mood." If the Times has evidence that Mr. Lampert has rapid unpredictable mood swings that have affected the performance of the company he leads, it might report them rather than slinging around unsubstantiated pejorative adjectives.

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